Where the position starts owning them.
Have you ever felt sick looking at your portfolio? Not the size of your corpus. The red %-ages neatly positioned in brackets — a weekly or monthly drawdown.
If so, you have company.
Stanley Druckenmiller is a celebrated hedge-fund manager and macro investor. If you’ve not heard of him, you may be familiar with a chap that trained under him in the 1990s — Scott Bessent. He is a big deal in the investor community.
Druck does not like over-diversification. He takes concentrated bets. And often quotes Andrew Carnegie:
“The way to become rich is to put all your eggs in one basket and then watch that basket.”
He openly admits that he suffers from the Delhi-Belly during drawdowns. He is known to have thrown up multiple times during tumultuous weeks. Not from bad food. But the size of his position.
Every investor has a number. When concentration rises to a level that market volatility is no longer a theoretical figure — it affects your gut. Then behaviour. Followed by returns.
This piece is about finding that number. It’s a personal journey, not a mathematical model.
In 2024, the Indian markets could do no wrong. We had sharply recovered from Covid lows and were seen as a top destination for global equity flows. This was also the period when participation by Indian retail exploded.
The situation has changed in 2026 — FIIs have pulled out approximately ₹4.0 lakh crore out of Indian equities since 2025. Yet, retail has bought every dip, effectively acting as shock absorbers. (Nifty 500 is +0.78% from January 1, 2025 to May 31, 2026.)
This is largely explained by increasing financialisation of retail savings in India — a steady shift from gold and bank deposits into equities. Correct. But incomplete.
Real income growth for a large section of the middle class has struggled to keep pace with inflation. RBI data shows that household savings as a % of GDP has slid from 11% in 2020 to 5.3% in 2024. At the same time, retail leverage has increased sharply.
This begs the question: where is all the dip-buying money coming from?
This piece traces who is buying the dip, why they believe it will keep working, and how they are funding it. It starts with a breakfast argument about home loan top-ups. It transitions to a silver trade that tests an important investment principle — demonstrating how position-sizing can transcend social boundaries to make sophisticated investors behave erratically.
Druckenmiller may throw up but can handle his position. Most of us cannot. The question is where your line is — and whether you find it before the market does.
Part I: The Breakfast Conversation
A business school friend was visiting Delhi. It was a good enough excuse to round up the old crew for a Thursday breakfast. Predictably, the eggs and coffee catch-up leads to market gossip.
I mentioned something that had been bothering me. Trying to figure out how retail continued to buy the dip, I had come across the possibility of people topping up home loans to buy stocks. To me, it was a dangerous sign.
One friend immediately pushed back.
“How is this different from topping up one’s home-loan for a wedding? It is silly to borrow at 15% if you have a top-up option. An EMI is an EMI. At least with equities there is residual value — stocks don’t go to zero. A wedding expense is gone once the festivities end.”
He had a point. At an individual level, he was right. The EMI does not vary whether the money was used for a Baraat-ka-Swagat or a stock portfolio. And equities are not an expense — even in a drawdown they retain value. Shaadi-ka-Kharcha is gone. Forever.
But his argument stopped one layer too early.
The real risk is not captured by rational mathematics. We need to look into psychology. Less of Fama. More of Thaler.
Part II: The Feedback Loop
A wedding is psychologically finished with the Doli and the settlement with the caterers. The EMI received henceforth is simply another bill. Like rent or school fees. Psychologically settled on Day 1.
A leveraged stock position is different.
When markets rise, leverage feels intelligent. When they fall, the same EMI feels burdensome. Unlike the wedding expense, a stock purchased with borrowed capital is not settled on Day 1. It brings with it marked-to-market anxiety. The issue here is not usually insolvency. It is behaviour.
A fixed liability matched to a volatile asset produces an altogether different thought pattern. It can produce the panic selling that turns a temporary drawdown into a permanent loss.
Counterintuitively, the borrower who has mentally expensed his entire borrowing is safer. Because there is nothing left to go wrong. He just needs to pay his EMI — no different than the monthly car payment.
Part III: The Fallacy of Composition
An economist’s way of saying: what is rational for one person to do may not result in a good outcome if the entire society did it simultaneously. You can get a good view of Vaibhav Sooryavanshi hitting his signature shots if you stand up on your seat. But if everyone stood up, it would serve no one’s purpose.
This is precisely the same when it comes to borrowing to buy stocks. It may make sense for A and B individually. But if millions did this simultaneously, it becomes macroeconomics. A bout of volatility or a protracted correction can cause the entire structure to collapse like a house of cards.
As prices rise, we feel smart. It validates our decision and encourages us to buy more. This in turn pushes prices higher. And so goes the merry-go-round.
Hyman Minsky described this decades ago: first, borrowers service debt comfortably from cash flows. Then they rely on refinancing. And finally, they need the asset itself to keep appreciating.
Part IV: The US Parallel
This movie played out in 2007. Encouraged by rising property prices, US homeowners started taking home equity lines of credit to finance purchases of additional properties. This was then given a dose of steroids with sub-prime lending, bundling loans into mortgage-backed securities, and excessive leverage. Everyone was a winner while the music played.
The music stops, eventually. When prices stopped rising in 2006, the loop snapped. A correction in housing prices led to a banking crisis and then a credit crisis. It culminated in a global recession.
I am not comparing the current India situation to America in 2008. The leverage is much smaller and structures far simpler. And our regulators flagged this risk early. In August 2024, Governor Das raised concerns about speculative use of home top-up loans. He acknowledged in November 2024 that his findings were based on anecdotal evidence — once a top-up loan is disbursed into a bank account, what the borrower uses it for becomes indistinguishable at the system level.
The point here is not to predict. It is to remain open to pattern recognition.
Part V: Who Is Buying the Dip?
Buy the dip is the counsel you are likely to receive from your gym trainer, your dentist, and perhaps even the passenger seated next to you on a flight to Jammu.
FIIs sold approximately ₹1.6 lakh crore in 2025 and over ₹2.4 lakh crore by late May 2026. Yet, there is no collapse. The Nifty 500 is at January 2025 levels. The Nifty Midcap 150 is near all-time highs at the date of writing.
SIPs have been running north of ₹25,000–29,000 crore per month. DII ownership now exceeds FII ownership. In free-float terms, DIIs now comprise 41.2% compared to FIIs’ 33.8%, according to a Motilal Oswal report from May 2026.
Indian households have been under-allocated to equities. Their openness to moving fixed deposits, gold, and real estate savings towards financial markets is a healthy sign. But this tells us the What. Not the Why or the How.
The Why
In March 2020, India had approximately 4 crore Demat accounts. In May 2026, this number has surpassed 22 crore. Between 1997 and December 2022, it took 25 years to cross the 11 crore mark. The last 11 crore accounts have taken just over 3 years.
The Covid crash was the fastest recovery in market history. And all corrections since — rate hikes in 2022, Russia-Ukraine War, 2024 election lows, FII exodus, India-Pakistan War, liberation day tariffs — have been short-lived.
The experiential bias in the new cohort of Demat owners is deep. Dips recover fast. Therefore, must be bought.
This works until it doesn’t. The current generation of dip-buyers has not been tested by a prolonged bear market — the kind that lasts years, not months. Where SIP returns may take 3 to 5 years to beat FD returns. For context: a two-year SIP into Nifty 50 ending mid-2026 has, depending on start date, delivered returns at or below a simple fixed deposit (read last month’s piece).
The How
For some households, the SIP money is being routed from what would have otherwise gone into a bank deposit or gold. This may be regarded as patient capital that can ride out an equity drawdown.
For others, this may be leveraged optimism. The topping up of home loans at 8% per annum in the hope of making an easy 15% in the stock market — a run-rate that has become a common expectation amongst many post-Covid entrants.
Middle-class salary growth has been roughly 0.4%–0.8% CAGR over the past decade in real terms. IT hiring has stalled. Household savings are at a 50-year low. Credit card debt and personal loan EMIs are rising. Consumption is increasingly funded by credit, not income.
If a large portion of domestic capital absorbing FII selling is leveraged, the resilience of the “buy the dip” strategy will be short-lived. Patient capital can withstand a three-year drawdown. Borrowed money comes with a timer.
Part VI: The Silver Trade
So far, we have focused on retail investors — perhaps even retail-punters topping up their loans in the hope for market riches. This might not seem relevant to you.
It may interest you to learn that wealthy investors create the same trap, without borrowing a rupee. They do it through position sizing. The trap is behavioural, not a leverage-induced margin call.
Consider Silver.
In 2024 and 2025, Silver had a solid investment thesis — high demand from the new economy (datacentres, EVs, AI), an attractive Au-Ag ratio, and a structural deficit due to years of underinvestment in mines. Silver investors celebrated 2025. And then in early 2026, the metal went parabolic.
Silver entered at around $28.8/oz on January 1, 2025. It briefly topped $120/oz — over ₹4,00,000 per kg on MCX. The move stopped looking like a commodity rally and started looking like a short squeeze.
On Thursday, January 29, Comex silver hit an all-time intra-day high of $121.6/oz. Then came the Comex margin hikes, which turned into a nightmare for silver traders.
The geniuses of Wednesday were scrambling for collateral by Friday. Silver collapsed 39% intraday, violently bottoming at $74.00/oz on Friday January 30, before settling the day at $78.53 — a net single-day closing loss of 31.4%.
If silver was 5% of your portfolio, this was a wild ride. But manageable. You were in control of your physiology. At 5%, you were lucid — able to evaluate the thesis and next steps rationally.
If you had spotted Silver early in 2024, allocated 5%, rode the wave, and let the position quietly drift to 25% of your portfolio — the same price action likely left you with an altogether different experience.
In retro-Bollywood speak: Raaton-ki-Neend, aur Dil-ka-chain. Gone in 48 hours.
First excitement, then overconfidence, then anchoring to the high, then panic. Finally, longing for a reset. This is the same sequence faced by the retail investor servicing an EMI against a falling portfolio of small-cap stocks.
Very different balance sheets. But the same psychology.
Part VII: The Real Purpose of Position Sizing
Most investing blowups don’t begin with stupidity. They begin with success. And this is what makes position sizing an intricate part of investment management.
If you are an active investor, you must take a stand. To create alpha, you must be meaningfully overweight the right businesses, sectors, or themes at the right time. It is better to be lazy and invest in index funds than to be busy, safe, and create portfolios that hug the index.
Interestingly, an investor who has taken a large risk-off position at a time that may seem to her like market frenzy is decoupled from market results. She is demonstrating active management.
To move the needle, we must back our convictions and thesis. Else we may be right in a big way, yet still have little to show for it in our investment accounts. This concentration, however, comes with baggage. A position that is financially sound and backed by impregnable facts can still become behaviourally dangerous. That is what we must balance.
When it comes to position sizing, we need to find our sweet spot — we need to stop short of the point where it becomes large enough to distort judgment during volatility. Most investors spend a lot of time analysing businesses and themes. They will be richer to also analyse how they behave under stress.
Part VIII: The Discipline
- Do not mortgage your home to fund your investments: Never borrow against critical assets to satiate speculative cravings.
- Size for both outcomes — good and bad: How will you feel if your thesis proved faulty and you faced a 30% drawdown? In such situations, it is acceptable to be uncomfortable. We must avoid being distraught.
- Rebalancing is an important part of investing: Do not only celebrate a vertical run — trim your position. You are subconsciously anchored to your peak position, not your entry cost.
- Separate conviction from size: You can be incredibly bullish on an idea and still hold a moderate position to account for the probability of being wrong.
Final Thought
My friend at breakfast wasn’t wrong. Equities do retain value. The EMI is identical. His logic was sound. But he stopped one layer too early.
Investing risk is rarely just about assets and liabilities. It is about what volatility does to behaviour. The danger begins when market movements stop being data and start influencing our judgment.
That is the point where a position stops being an investment — and starts owning you.
What’s the “number” that starts affecting your sleep? Let’s discuss in the comments below.